Transcript WHY - New York City Paralegal Association Inc

WHY? WHERE? WHAT?
UNDERSTANDING UCC
Presented by Mariana Fradman, Senior Legal Assistant
Chadbourne & Parke LLP
WHY?
• The term UCC is short for Uniform Commercial Code.
• Under the provisions of state Universal Commercial
Code statutes, when personal property (equipment,
inventory, and other tangible assets of a business) are
used as collateral for borrowing, a UCC1 statement is
prepared, signed, and filed. This process is also called
"perfecting the security interest" in the property, and
this type of loan is a secured loan.
• The filing creates a lien against the property, so the
borrower may not dispose of the property without
paying off the debt.
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WHY? (cont’d)
• In the U.S. the term "security interest" is often used
interchangeably with "lien". However, the term "lien" is
more often associated with the collateral of real
property than with of personal property.
• A security interest is typically granted by a "security
agreement". The security interest is established with
respect to the property, if the debtor has an ownership
interest in the property and the holder of the security
interest conferred value to the debtor, such as giving a
loan.
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WHY? (cont’d)
• The holder may "perfect" the security interest to put
third parties on notice thereof. Perfection is typically
achieved by filing a financing statement with
government, often the secretary of state located at a
jurisdiction where a corporate debtor is incorporated.
Perfection can also be obtained by possession of the
collateral, if the collateral is tangible property.
• Absent perfection, the holder of the security interest
may have difficulty enforcing his rights in the collateral
vis-á-vis third parties, including a trustee in bankruptcy
and other creditors who claim a security interest in the
same collateral.
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WHERE?
• UCC documents filed with the Department of State
are public records that are subject to disclosure
under the Uniform Commercial Code. The
Department also provides copies of UCC
documents upon request and payment of the
applicable fee.
• UCC documents filed in the state of incorporation
of the company; AND
• UCC documents filed on the county level where the
property is located.
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WHERE? (cont’d)
• Why records on financial obligations (including IRS liens) incurred by
individuals , in business as a sole proprietor, business entities and
corporations are important?
– This information is important to any business or financial institution
contemplating entering into a lien transaction as the secured party
(the party providing funds or financing collateral).
– Knowing the current financial status of the debtor party (the potential
borrower) before extending credit is crucial, and it is the number of
active, existing liens already in effect for that particular debtor party
that most interests the potential secured party.
– As a prerequisite for entering into a lien relationship, many secured
parties first research a debtor name to ascertain their credit
worthiness and then demand a lien filing in regard to the actual,
current transaction. Secured parties routinely include banks,
commercial businesses (appliances, autos, boats), and sole
proprietors.
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WHAT?
• Original Financing Statement (UCC1)
– the collateral is as-extracted collateral or timber to
be cut; or
– the financing statement is filed as a fixture filing
and the collateral is goods that are or are to
become fixtures; or
– the collateral is a cooperative interest.
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WHAT? (cont’d)
• Amendment, Assignment, Continuation, &
Termination (UCC3)
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Uniform Commercial Code Filing
Requirements
• Legislation revising Article 9 of the Uniform
Commercial Code was signed into law as Chapter
84 of the Laws of 2001 and became effective July
1, 2001. That was the first major change since
1972.
• It brought greater certainty to financing
transactions.
• Reduced transaction costs
– By reducing number of filings
– By reducing number of searches
• Expanded scope.
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Uniform Commercial Code Filing
Requirements (cont’d)
• Redefined correct name of debtor for
financing statements, including
– Registered Organization
– "Unregistered" Organization
– Individual
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Uniform Commercial Code Filing
Requirements (cont’d)
• "Seriously Misleading”
– Use the correct legal name of the debtor and the
mailing address of the debtor;
– The filing must indicate whether the debtor is an
individual or an organization;
– If the debtor is an individual, the filing must
identify the debtor's last name; and
– If the debtor is an organization, the filing must
provide both the debtor's type of organization and
jurisdiction of organization.
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Uniform Commercial Code Filing
Requirements (cont’d)
• Retention of Priority - this transition took
place through July 1, 2006
– From collateral based location to location of
debtor
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Uniform Commercial Code Filing
Requirements (cont’d)
The fact that a record is accepted for filing
does not necessarily mean that the filing is
effective for the purpose intended by the filer.
The filer is solely responsible for determining
the proper office in which to file and for
determining that the record to be filed
contains the information necessary to make
the record effective to accomplish the filer's
purpose.
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Uniform Commercial Code Filing
Requirements (cont’d)
• Electronic transactions
– Elimination of signatures
• Co-op filing
• New Uniform Forms
– Additional data requirements
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2013 AMENDED Article 9 Overview
• Proposed Effective Dated of July 1, 2013
• Some terminology clarified along with some
additions
• New forms removing data requirements
introduced in 2001
– Relocation of fields
• Transition end date: July 1, 2018
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2013 AMENDED Article 9 Overview
(cont’d)
• Amended A9 Definition Changes/Clarifications
– § 9-102 Public Organic Record (new)
• (68) A record that is available to the public for
inspection that is:
– A) a record consisting of the record initially filed with or issued
by a State or the U.S. to form or organize an organization and
any record filed with or issued by the State of the U.S. which
amends or restates the initial record.
– B) an organic record of a business trust consisting of the
record initially field with a state and any record filed with the
State which amends or restates the initial record, if a statute
of the State governing business trusts requires that the record
be filed with the State.
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2013 AMENDED Article 9 Overview
(cont’d)
• Amended A9 Definition Changes/Clarifications
(cont’d)
– (71) definition of "Registered Organization" expanded
to include Business Trusts…"Registered
Organization"…organization formed or organized
under the law of a single state or the U.S. by the filing
of a public organic record with, the issuance of a
public organic record by, or the enactment of
legislation by the State or U.S. The term includes a
business trust that is formed or organized under the
law of a single State…
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2013 AMENDED Article 9 Overview
(cont’d)
• Amended A9 Definition Changes/Clarifications
(cont’d)
– Clarifies registered organization name issue
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2013 AMENDED Article 9 Overview
(cont’d)
– § 9-503 Clarifies Individual Name issues
• Individual Name
– Alternative A (only if)
» Name as it appears on unexpired driver's license
» If no driver's license, unexpired state-issued ID card from
primary state of residence
• What about passports?
– Alternative B (Safe Harbor)
» Individual's name (current law)
» Individual debtor's name and first personal name or
» Name as it appears on unexpired driver's license or state
issued ID
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2013 AMENDED Article 9 Overview
(cont’d)
– Case Law & the Legal Name of the Debtor
• Examples: Dr. John Doe, John Doe, MD, John Doe, or
Doe, John (correct name)…
• Examples: First Company Holdings, Inc. (on Articles of
Incorporation) vs. First Company Holdings (listed on
UCC Statement)
• Words vs. Symbols: Alvin & Chipmunks vs. Alvin and
Chipmunks
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2013 AMENDED Article 9 Overview
(cont’d)
• In the case of an individual, some examples of common
errors include providing the following in the "Debtor's
Name" section of the financing statement:
–
–
–
–
–
–
–
–
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Mr. John J. Smith
John Smith
John J. Smith, Esq.
John J. Smith, M.D.
John J. Smith, C.P.A.
John J. Smith (debtor in possession)
John J. Smith d/b/a ABC Manufacturing Corp.
John J. Smith a/k/a Jon J. Smith
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2013 AMENDED Article 9 Overview
(cont’d)
• In the case of a business, some examples of
common errors include providing the following in
the "Debtor's Name" section of the financing
statement:
–
–
–
–
–
–
–
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ABC Manufacturing Corp. d/b/a Albany Tools
ABC Manufacturing Corp. (a New York Corporation)
ABC Manufacturing
ABC Mfg. Corp.
ABC Manufacturing Corp. a division of XYZ Enterprises, Inc.
ABC Manufacturing Corp. a/k/a John J. Smith
John J. Smith d/b/a ABC Manufacturing Corp.
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2013 AMENDED Article 9 Overview
(cont’d)
• Old National Forms vs. New National Forms
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UCC Financing Statement (UCC1)
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UCC Financing Statement Addendum
(UCC1AD)
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UCC Financing Statement Additional
Party (UCC1AP)
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UCC Financing Statement
Amendment (UCC3)
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National UCC Financing Statement
Amendment Addendum (UCC3Ad)
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UCC Financing Statement Amendment
Additional Party (UCC3AP)
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National Correction Statement (UCC5)
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National Information Request
(UCC11)
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New York Financial Statement
Cooperative Addendum (UCC1CAd)
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NEW YORK STATE
DEPARTMENT OF STATE
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REFERENCES:
• Article 9 of the Uniform Commercial Code can be accessed through
the New York State Department of State Website at
(http://www.dos.ny.gov/corps/uccforms.html)
• International Association of Commercial Administrators (IACA)
• http://www.nationalcorp.com/ncr/resources/UCCResources/Article-9-Forms
• Article 9 Amendments: Non-Uniform Provisions and Effective Dates
by Despina Shields, National Corporate Research, Ltd.
http://info.nationalcorp.com/blog/bid/271618/Article-9Amendments-Non-Uniform-Provisions-and-Effective-Dates
• http://www.law.cornell.edu/ucc/9/overview.html
• http://www.dos.ny.gov/corps/uccfilingguide.html
• http://apps.americanbar.org/dch/committee.cfm?com=CL710043
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Q&A
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